Will the cost of transportation fuel cause job losses? What part does the ethanol industry play in the national economy?

The U.S. Bureau of Labor Statistics (BLS) offered this fact: on average, every time oil prices go up 10 percent, 150,000 American's loose their jobs.

February of 2005 was the most recent period of time the Midwest saw gasoline average less than $2.00 per gallon until just recently, according to the Energy Information Administration, which provides official statistics for the U.S. government.

During the intervening time, gasoline peaked at more than $4.00 per gallon in June of 2008 reflecting a 200 percent increase in less than four years.

In October, the BLS released its monthly employment situation summary that stated, "Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months." (Find this news release at www.bls.gov)

The ethanol industry may be able to offer some redemption for the fuel economy situation by a couple routes.

First, according to an Iowa State University study, ethanol is holding down the price of gasoline by 29 to 40 cents per gallon. For a family using 1,000 gallons of gas per year, the savings amounts to about $350 annually, on average, thereby easing the financial pressure of transportation.

Secondly, ethanol manufacturing creates jobs. In 2007, the renewable fuel industry is credited with creating 238,000 jobs nationwide and may create as many as 1.1 million new jobs by 2022, according to the report, "Contribution of the Ethanol Industry to the Economy of the United States", presented by LECG, LLC, an independent, international consulting firm based out of Emeryville, California, to the U.S. Department of Energy in February of 2008.

The year 2022 is particularly important because the Energy Independence and Security Act of 2007 signed into law by President George Bush, December 19, 2007, mandates increasing manufacture and inclusion of renewable fuels through this date.

It was designed as "an act to move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options" as stated in the introduction of the act.

Many aspects of energy usage are addressed by the act including vehicle fuel economy; appliance and lighting standards; energy savings in buildings, industry, as well as governmental and public institutions; research and development; carbon capture and sequestration; finally, most germane to the discussion of ethanol - energy security through increased production of biofuels.

Amendments to the Clean Air Act are included in the Energy Independence and Security Act that direct actions of the Environmental Protection Agency (EPA) to ensure "domestic transportation fuel sold or introduced into commerce" contains mandated volumes of biofuels and renewable fuels, those produced from a renewable source such as corn starch or other biomass, examples include crop residue or cellulose.

The mandate increases the applicable volume annually from 11.1 billion gallons of renewable fuels in 2009, to 20.5 billion gallons in 2015, finally to 36 billion gallons in 2022.

Bruce Babcock, professor of Agricultural Economics and director of the Center for Agriculture and Rural Development at Iowa State University, addressed this legislation and said, "In the past, a big impact has come from the blender's credit because it increases the value of ethanol allowing manufacturers to pay more for corn. In the future, mandates from the Energy Independence and Security Act of 2007 will dictate how much ethanol is used in consumer fuel and requires a large amount of the corn crop to go into ethanol."

Dave Moody, president of the Iowa Pork Producers Association and a livestock producer from Nevada, Iowa, said that subsidies distort the market. He continued, "We would like to see blenders credits sunset in the next year or so.

As a representative of the pork association, Moody stated, "We are supportive of the ethanol industry in general; what we have a problem with is the government supporting one use of corn versus another."

His concerns are caused by the effect of competition from the ethanol industry with the livestock feeding industry.

Babcock explained, "Ethanol subsidies raise the price of corn. Higher feed cost increases prices of end user products." Visit www.dbrnews.com and see Food vs. Fuel: Where's the corn going for a more comprehensive discussion of ethanol's effect on food prices.

The "blender's credit" to which Babcock and Moody refer, is the Volumetric Ethanol Excise Tax Credit (VEETC) as part of the American Jobs Creation Act of 2004. Essentially, the VEETC reduces the amount of tax a gasoline blender has to pay per volume of gasoline based on the amount of ethanol included.

A blend of 10 percent ethanol has tax reduced from 18.3 per gallon to 13.2 (a savings of 5.1) thereby offering an economic benefit to increase the amount of ethanol used.

Lower percentages of ethanol receive a lesser credit and higher percentages of ethanol receive a greater credit; E85, the gasoline blend containing 85 percent ethanol, receives credits totally 42 per gallon. Presently, the VEETC is effective through 2010.

Proposed changes to the Energy Independence and Security Act of 2007 and American Jobs Creation Act of 2004 are part of ongoing legislative discussion.

In fact, the Energy Independence and Security Act instructs the Secretary of Energy Samuel Bodman, the Secretary of Agriculture Edward Schafer, and Administrator of the Environmental Protection Agency Stephen Johnson, to review and assess the impacts of the Act's requirements on industries to which they relate including producers of feed grains and biomass, livestock, food, forest products, and energy; entities interested in conservation, the environment, or nutrition; consumers of renewable fuels; and land grant universities.

To offer input contact the above named administrators or local legislative representatives and become part of the transitional renewable fuels movement.